The impact of growth on unemployment in a low vs. a high inflation environment

During the 1970s, industrial countries, including the US and continental Europa, experienced a combination of slow productivity growth and high unemplyoment. Subsequent research has shown that the standard model of unemp
During the 1970s, industrial countries, including the US and continental Europa, experienced a combination of slow productivity growth and high unemplyoment. Subsequent research has shown that the standard model of unemployment actually gives counterfactual predictions. Motivated by the observation that the 1970s were also characterized by high and rising inflation, Tesfaselassie and Wolters examine the effect of growth on unemployment in the presence of nominal price rigidity.
The authors demonstrate that the effect of growth on unemployment may be positive or negative. Faster growth leads to lower unemployment if the rate of inflation is high enough. There is a threshold level of inflation below which faster growth leads to higher unemployment and above which faster growth leads to lower unemployment. The threshold level in turn depends on labor market characteristics, such as hiring efficiency, the job destruction rate, workers' relative bargaining power and the opportunity cost of work.
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Metadaten
Author:Mewael F. Tesfaselassie, Maik Wolters
URN:urn:nbn:de:hebis:30:3-431590
Parent Title (English):Working paper series / Institute for Monetary and Financial Stability ; 113
Series (Serial Number):Working Paper Series : Institute for Monetary and Financial Stability (113)
Publisher:Johann Wolfgang Goethe-Univ., Inst. for Monetary and Financial Stability
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2017
Year of first Publication:2017
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2017/04/25
Tag:growth; trend inflation; unemployment
Issue:April 2017
Pagenumber:37
HeBIS PPN:402915658
Institutes:Wirtschaftswissenschaften
Institute for Monetary and Financial Stability (IMFS)
Center for Financial Studies (CFS)
Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital (Updated!)
E31 Price Level; Inflation; Deflation
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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